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China’s debt bubble is getting only more dangerous

The Washington Post

It would be like finding out Warren Buffett's financial empire may have been, quite possibly, a sham...

That brings us to problem No. 2. It's hard to lend out so much money so fast without a lot of it going to people who won't be able to pay you back. In China's case, the consultancy Oxford Economics thinks this could add up to nonperforming loans equal to 14 percent of gross domestic product. Now, it's true that China was able to grow out of an even bigger debt problem 15 years ago, but its economy has slowed too much to pull off that again. Beijing is trying to get lenders to instead swap their bad debts for ownership stakes or sell them to investors — good luck with that — but it sure seems as though it's going to need to put some money in as well. That, at least, is what shadow banks are counting on. They "guaranteed" big returns by taking big risks they pretended were not, so now that a lot of those bets are going bad, they're clamoring for bailouts.